While prudent investing is a major component of retirement success, the behavior of the saver is also fundamentally important when it comes to preparing for the future. Every path looks a little bit different but there are a few underlying themes that run strong when we compare various habits. By borrowing from the success of others, we can enhance our own ability to prepare for retirement.
1. Plan for the long-term
Savers are significantly more likely to determine when they want to retire and work backward from there when it comes to forming their savings plan. They take into account what their expenses will be in retirement—and how much income they expect to be able to generate through Social Security and other investments.An easy way to make sure you are on track or how to get back on track is have a financial plan run for you.
2. Set ambitious savings targets
It’s commendable that so many people strive to “save as much as they can” for retirement. But goals are most effective when they’re clear and specific. That’s why many savers aim to max out their 401(k) contributions at $18,500 (or even higher once you turn 50). It sets the bar high, but you’ll know you’re moving toward your long-term goals. For higher earners or those with more ambitious goals (early retirement, etc.), even the max might not be enough. Make sure your path matches what you are trying to accomplish.
3. Track their progress
Savers aren’t afraid to “step on the scale.” They proactively check their retirement plan balances from time to time, so they have a consistent idea of where they stand. This gives them a better sense of how they may need to course-correct their savings strategy over time. While investment returns will fluctuate year to year, staying consistent in savings and re-examining your progress to your goals is essential for success towards retirement.